Saturday, January 31, 2009

Why the world's economic leaders blame the catastrophe on the system instead of themselves. - By Daniel Gross - Slate Magazine:At a CNBC event yesterday, groups of 10 to 12 people sat at tables and mooted three questions: Which policy assumption failed? Which regulatory failure proved to be the largest systemic shock? And which market failure proved most damaging? The answers were obvious: poor regulation of the shadow banking system, mispricing of risk, the failure of models. But there was very little talk about the people who helped design and justify the systems, the mispricing, and the models. At one point, someone in the crowd stood up and said: "It's intriguing nobody is to blame. In other industries, there are consequences if you make toxic products that hurt people. Policy makers need to make it clear that there are serious consequences for that type of behavior." Big applause! And yet aside from the odd mention of Alan Greenspan and an oblique reference to Robert Rubin, the former treasury secretary who became a senior executive at Citigroup, there was little talk of individual players who had responsibility.

The dismissal of human agency is ironic, but also predictable. Just as financial markets in the United States privatize profits and socialize losses, Davos and other conferences like this privatize success (by chalking it up to individuals) and socialize failure (by blaming it on large systemic problems).